Lease & Royalty Payments

Energy Services | Harrison County | Industrywide Issues | Jefferson County (OH) | Lease & Royalty Payments | Ohio | Pipelines | Sunoco Logistics

Sunoco Settles Case with OH Landowners to Allow Mariner East 2
August 10, 2015August 10, 2015

Sunoco Logistics Partners still has an uphill battle to get certain communities to approve pump and valve stations for the Mariner East 1 and 2 pipelines, but is making progress (see Sunoco Reconciles Differences with Municipalities re Mariner East). Sunoco can cross off one problem area in Harrison and Jefferson counties (in Ohio) with respect to the Mariner East 2 set of pipelines. A group of landowners in those two counties have just settled with Sunoco out of court for 50-foot-wide permanent easements the company will place on their property to build the second set of Mariner pipelines. What happened is that the landowners (wisely) held out and got more money out of Sunoco. Everyone is now happy–the landowners get a better (more reasonable) price for permanent easements, and Sunoco is that much closer to beginning construction on the next Mariner project…
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Energy Companies | Industrywide Issues | Lease & Royalty Payments | Litigation | Pennsylvania | Range Resources Corp | Statewide PA | Washington County

PA Court: Gas Storage Fields Lock Up Property for Drilling Too
July 30, 2015July 30, 2015

In some locations there are small or large underground storage fields for natural gas located in the Marcellus/Utica. We’ve covered stories in the past about one such field–the Brinker Storage Field, a 35,000 acre area in Columbiana County, Ohio that Columbia has used to store natural gas going back more than 50 years (see Some Brinker Field (OH) Leases Revised, Others in Lawsuit). More often than not these fields seem to be a flash point with respect to leases and potential drilling under them. Because the fields were leased years ago, there are disagreements about what the leases say about royalties for any gas drilled under them. Little did we know (in fact we didn’t know) there are such storage fields located in Pennsylvania too. A case went to court challenging the right of Range Resources and NiSource (their Columbia Gas subsidiary) to retain lease rights for both storing natural gas and drilling for natural gas for property partially included in a unit that includes a 14,000 underground Donegal Storage Field operated by NiSource in Washington County, PA. The landowners have just lost the case–meaning units with storage fields under them can “hold by production” undrilled land in the unit solely because there is gas stored…
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Butler County | Energy Companies | Industrywide Issues | Lease & Royalty Payments | Litigation | Pennsylvania | XTO

PA Landowners Sue XTO Energy for Shorting Them on Royalties
July 21, 2015July 21, 2015

Two Butler County, PA landowners with a combined 245.7 acres of land leased to XTO Energy have sued XTO claiming that XTO is breaking the lease agreement by paying royalties below 1/8 of what XTO receives in revenue for the gas. So far we’ve heard about Chesapeake Energy being the focus of these types of lawsuits for their shenanigans of inflating post-production costs from the pipeline company and then receiving a “kick back” of investments by the same pipeline company (see Chesapeake Shafting Landowners out of Royalties Mess Gets Messier). Although we don’t believe the XTO lawsuit claims the exact same thing, what it does claim is that the lease signed with the landowners does not include language that would allow XTO to deduct certain charges that they are now deducting. That’s the claim. Of course you need lawyers to sue and the lawyers in this case aren’t content with representing just two landowners. They want to turn this into a massive class action and represent hundreds of landowners (cha ching!)…
Read More “PA Landowners Sue XTO Energy for Shorting Them on Royalties”
Antero Resources | Energy Companies | Lease & Royalty Payments | Ohio | Statewide OH | Utica Shale

Muskingum Watershed District Royalties Fall 73% in 6 Months – Why?
July 21, 2015July 21, 2015

Ace reporter and MDN friend Bob Downing from the Akron Beacon Journal has written an insightful article about the dramatic decrease in royalty payments being received by the Muskingum Watershed Conservancy District (MWCD). The MWCD was organized in 1933 to reduce the effects of flooding and conserve water for beneficial public uses, and oversees 16 dams and reservoirs across 22 counties in Ohio, covering 20% of the state. It is a massive area of Ohio under the oversight and control of the MWCD. They’ve leased thousands of acres to Antero Resources for Utica Shale drilling and currently there are 13 Utica Shale wells drilled on MWCD property. Here’s the bombshell: Over the past six months, royalty payments to the MWCD for production from those 13 wells has dropped 73%, from just over $1 million per month last December to just under $275,000 in May. Why? That’s the question Bob set out to answer…
Read More “Muskingum Watershed District Royalties Fall 73% in 6 Months – Why?”
Bradford County | Chesapeake Energy | Energy Companies | Industrywide Issues | Lease & Royalty Payments | Litigation | Pennsylvania | Regulation

Chesapeake Energy’s Theft of PA Landowner’s Royalties
July 6, 2015July 6, 2015

It’s no wonder Pennsylvania landowners are up in arms over their treatment by Chesapeake Energy. Two weeks ago MDN told you about a new bill, HB 1391, that will ensure Pennsylvania landowners receive a minimum 12.5% in royalties for any gas or oil taken from their land (see New Bill HB 1391 Will Guarantee PA Landowners 12.5% Royalties). The reason such a bill is necessary is because landowners are being robbed by some (not all) drillers who are deducting certain “post production” expenses from royalty checks–essentially stealing money that belongs to landowners. Here is a perfect example from Bradford County, PA–the most drilled Marcellus county in the state…
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Coterra Energy (Cabot O&G) | Energy Companies | Industrywide Issues | Lease & Royalty Payments | Litigation | Pennsylvania | Statewide PA | Susquehanna County

PA Court Decision: Leases Don’t Go on Pause When Landowners Sue
July 2, 2015July 2, 2015

Put on your hip boots, we have some deep waters to wade through with respect to an important court decision in Pennsylvania that affects landowners and drillers. Last October MDN told you about an important lawsuit that went to the Pennsylvania Supreme Court, a case called Harrison v Cabot Oil & Gas (see Important Landowner/Driller Case Heads to PA Supreme Court). In brief, Susquehanna County, PA landowners Wayne and Mary Harrison signed a lease with Cabot Oil & Gas for $100 per acre and 12.5% royalties in 2010. Learning that others in their area got better deals and feeling they were not only hoodwinked but pressured into signing, they sued Cabot halfway through the lease (before any drilling was done) to dissolve the lease. Ultimately that lawsuit was decided in favor of Cabot. But by the time the lawsuit was done and dusted, the original 5-year term had expired without Cabot drilling. The Harrisons claimed since Cabot hadn’t drilled, the lease is now over with. Cabot said the lease went on “pause” when the Harrison’s sued–you can’t very well drill with an active lawsuit. This “lease on pause” case was appealed all the way to the Supreme Court in PA, and in February the Supreme Court ruled that just because there is ongoing litigation, Cabot didn’t have the presumption that the lease was paused (see Cabot O&G Loses PA Supreme Court Case to Extend Lease). That is, Cabot lost the case. But it was referred back to the Third Circuit Court of Appeals for more work before a final final ruling. We now have that final final ruling…
Read More “PA Court Decision: Leases Don’t Go on Pause When Landowners Sue”
Industrywide Issues | Lease & Royalty Payments | Pennsylvania | Regulation | Statewide PA

New Bill HB 1391 Will Guarantee PA Landowners 12.5% Royalties
June 25, 2015June 25, 2015

Last week MDN told you that a new royalty bill would be introduced in the Pennsylvania legislature to guarantee landowners get a minimum 12.5% royalty (see New Bill Pushes 12.5% Guaranteed Minimum Royalty for PA Landowners). The new bill, House Bill (HB) 1391 is, according to the bill’s main sponsor State Rep. Garth Everett, more narrowly focused than the previous bill introduced in 2013 (HB 1684). Gareth and a group of supporters from the PA chapter of the National Association of Royalty Owners gathered in the Capitol Rotunda in Harrisburg on Tuesday in a bill launch rally. We don’t (yet) have the language of the new bill, but we do have Everett’s description of what’s in the bill, a brief video interview of Everett from Tuesday’s launch rally, and a newspaper write-up from the event…
Read More “New Bill HB 1391 Will Guarantee PA Landowners 12.5% Royalties”
Energy Services | Industrywide Issues | Lease & Royalty Payments | Pennsylvania | Pipelines | Statewide PA | Sunoco Logistics

The Landman Cometh – Sunoco Seeks Easements for Mariner East 2
June 24, 2015June 24, 2015

Landmen for Sunoco Logistics have begun knocking on doors and talking to residents in nine municipalities in Chester County and six in Delaware County (Philadelphia area) to sign easements to allow the Mariner East 2 pipeline to be built through their property. Sunoco wants to begin construction in early 2016. Meetings have cropped up for landowners to hear information about the project, and get information about what their rights are and what terms they should seek before signing an easement. What is Sunoco offering in the way of compensation? It varies from landowner to landowner, depending on where the land is located and how much land they must cross. We do know how much the company offered one resident, in Uwchlan Township (Chester County)…
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Industrywide Issues | Lease & Royalty Payments | Pennsylvania | Regulation | Statewide PA

New Bill Pushes 12.5% Guaranteed Minimum Royalty for PA Landowners
June 18, 2015June 18, 2015

One of the big disappointments last year, for landowners, was the failure to pass House Bill (HB) 1684 which would clear up language from the Guaranteed Minimum Royalty Act of 1979. The GMRA of 1979 says landowners are supposed to get 12.5% minimum in royalties. Chesapeake (perhaps other drillers too) found loopholes and drove a truck through them, claiming marketing and pipeline transportation expenses that they deducted from royalties–leaving some landowners with checks for (literally) a few dollars (see Bradford County, PA Landowners Sue Chesapeake over Royalties). HB 1684 would have cleared up the language and ensured landowners get 12.5% as a minimum–but the bill was met with opposition from the drilling industry (see Rare Schism Between Landowners & Drillers over PA Royalty Law). The bill ultimately failed to get to the floor for a vote. But 2015 is a new year, and PA State Rep. Garth Everett, with the backing of the PA National Association of Royalty Owners (NARO), will introduce a brand new bill next week that is largely a reconstituted HB 1684. So far 35 members have signed on as co-sponsors. Everett and NARO are planning a “bill launch party” in the Capitol Rotunda for next Tuesday, June 23 at 1:30 pm. They want every single landowner who can to show up as a sign of support…
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Economic Impact | Industrywide Issues | Jobs | Lease & Royalty Payments | Pennsylvania | Supply Chain | Susquehanna County

Drilling Slowdown Creates Domino Effect in Susquehanna County, PA
June 18, 2015June 18, 2015

Low natural gas prices and lack of pipelines is affecting more than just the drillers in Susquehanna County, PA–it’s also affecting landowners, gas workers, and the businesses that depend on all of the above. Drillers in northeastern PA (as well as elsewhere) are laying down their drilling rigs. Fewer rigs means fewer new wells being drilled, meaning no royalties for those landowners. And it means fewer jobs for workers, and less business for companies that provide goods and services to drillers, the people who work for them, and landowners with less disposable income. A TV station in NEPA shines a light on the situation in Susquehanna County…
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American Energy Partners | Energy Companies | Industrywide Issues | Lease & Royalty Payments | Litigation | Ohio | Statewide OH

Problematic: McClendon’s AEP Not Paying Some of its Bills
June 15, 2015June 15, 2015

Does Aubrey McClendon’s American Energy Partners (AEP)–the new company he founded after being unceremoniously booted from Chesapeake Energy–have cash problems? You certainly wouldn’t think so. At last check in May 2014, McClendon had raised a staggering $8.7 billion in little more than a year (see Aubrey McClendon Raises Huge $8.7B for Shale Drilling…So Far). But the evidence keeps piling up that Aubrey isn’t paying his bills. In April, McClendon created a “blank check” company to raise $200 million in cash (see Aubrey McClendon’s New “Blank Check Company” Looks to Raise $200M). In May, Paloma Resources said a 3-way deal including McClendon’s AEP to lease 130,000 acres in the Ohio Utica Shale went bust because Aubrey didn’t have enough money to close the deal (see McClendon Running Out of Money?! Paloma Utica Deal Goes Bust). Last week MDN told you about a contractor working for AEP with several hundred thousand dollars in outstanding invoices that have gone unpaid–for more than 120 days (see Big McClendon News: Sells 35K Utica Acres, Creates New Company). Now the latest: a group of Ohio landowners have sued McClendon’s AEP along with an affiliate company and a land services company working for AEP, for non-payment of lease bonuses…
Read More “Problematic: McClendon’s AEP Not Paying Some of its Bills”
Bradford County | Chesapeake Energy | Energy Companies | Industrywide Issues | Lease & Royalty Payments | Litigation | Pennsylvania | Regulation

Bradford County, PA May Join Royalty Lawsuit Against Chesapeake
June 12, 2015June 12, 2015

In 2013, a group of Bradford County, PA landowners joined a lawsuit against Chesapeake Energy over Chessy’s apparent cheating them out of royalties using a ploy to pay high fees for pipelines in return for investments from that pipeline company later on (see Bradford County, PA Landowners Sue Chesapeake over Royalties). Some Bradford landowners were getting royalty checks from Chessy for a few dollars–literally. At issue is a state law that stipulates drillers must pay a minimum of 1/8 of revenue from gas and oil in royalties to the landowner. The controversy comes in that Chesapeake claims their contracts allow them to deduct reasonable expenses, like getting the gas to market, from the total. And with low prices–oh well–those royalty checks go far below 1/8. So what is at issue is how you define 1/8 for the purposes of paying royalties. Is it 1/8 of the gross? Or 1/8 of the net? And what would be allowed to be deducted for the net number? MDN previously told you about PA House Bill (HB) 1684 meant to clear up the confusion. HB 1684 went no where in the legislature last year (see Does PA Royalty Bill 1684 Still Have a Chance This Year?). Looks like the bill will come back around again this year–but before it does, the supervisors of Bradford County, which has land under lease with Chesapeake, are seriously considering joining the lawsuit against Chesapeake. They’re tired of waiting for 1684 to become law and tired of being shorted on their royalties…
Read More “Bradford County, PA May Join Royalty Lawsuit Against Chesapeake”
Lease & Royalty Payments | Pennsylvania | Statewide PA

PA DCNR May Go After Drillers for River/Creek Royalties Prev Paid
June 5, 2015June 5, 2015

Once again we ask the question: Is the state of Pennsylvania robbing landowners of royalties by claiming to “own” certain streams and rivers in the state? We’ve raised this issue a few times, the most recent in May (see PA DCNR Publishes Lease Agreements for Deals Under Rivers/Creeks). The state of PA says they own any creek or river and consequently the mineral rights beneath it if the creek or river is, or ever has been, used for commercial trade or travel. So if a river or big creek ever had a barge floating along it 150 years ago (yesteryear’s version of interstate highways) PA claims it now as theirs–and denies landowners who own the land on either side of it royalties and lease payments for the land under it. Now the PA Department of Conservation and Natural Resources (DCNR), headed up by the PennFuture Secretary of the DCNR Cindy Dunn, aims to collect. And just like the IRS, DCNR is “exploring” ways they can collect for gas already extracted and paid for. Will that come from the landowner’s pocket? Will the driller have to pay twice for the same gas? You see how things work in the PennFuture-controlled Wolf administration…
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Industrywide Issues | Lease & Royalty Payments | Pipelines | Statewide WV | West Virginia

How Much $ Should Landowners Get for a Pipeline Right-of-Way?
June 2, 2015June 2, 2015

How much money should landowners get for the pipelines that cross their property? Should pipeline companies pay for the width of the right-of-way, in addition to the length? Should landowners be compensated more if it’s a bigger pipeline that has to be buried deeper? And, will landowners truly be able to use the land (farmers plowing and planting) if a pipeline is buried under it? These are all really important questions. In West Virginia, a former inspector for the state Dept. of Environmental Protection says landowners should be getting $50 per foot for a pipeline right-of-way. The industry, as represented by the West Virginia Oil and Natural Gas Association, thinks $5 per foot is more like an acceptable number. Excuse us for laughing, but $5 per foot for a pipeline that will be in the ground for the next 30-50 years (or more)? We wouldn’t sign it–and we hope WV landowners don’t either…
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Allegheny County | Energy Companies | Lease & Royalty Payments | Olympus/Huntley & Huntley | Pennsylvania | Range Resources Corp

Deer Lakes School Signs Lease for $3,100/Acre + 18% Royalties
May 21, 2015May 21, 2015

Attention Martian parents from the Mars School District in Middlesex Township (Butler County), PA: In Allegheny County (bordering Butler County on the south) the Deer Lakes School District has just signed a lease to allow shale drilling under school property. Why are you Martians so afraid of shale drilling? (see Martian Arrogance: Town MUST “Protect Us” from Drilling via Zoning) At Tuesday night’s school board meeting, Deer Lakes board members voted to lease 110 acres of school property for drilling under (not on) with Huntley & Huntley, Inc. The lease terms are $3,100 per acre in a signing bonus and 18% royalties–yielding a nice check for $341,000 to the school just for signing. Those terms are not quite as rosy as last year’s deal struck by Allegheny County Executive Rich Fitzgerald who negotiated what turns out to be close to $4,000 per acre (and an 18% royalty) for leasing 1,180 acres in Deer Lakes Park (see Allegheny Co Exec Bests Range on Deer Lakes Park Lease Deal). The county park is literally a stone’s throw from the school…
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American Energy Partners | Belmont County | Energy Companies | Lease & Royalty Payments | Ohio | XTO

Another Belmont County Landowner Threatened with Forced Pooling
May 11, 2015May 11, 2015

In April MDN told you about a landowner in Belmont County, OH who had questions and objections to phrasing in a proposed lease agreement from XTO Energy that talks about “nuisance oil” (see XTO Threatens Belmont County, OH Landowner with Forced Pooling). NEVER sign a lease without running it by a competent oil & gas attorney, and ALWAYS get the sometimes obscure terminology in a lease explained before you sign it. That’s our advice. We have another story along the same lines as the “nuisance oil” story–language that energy companies can’t or won’t explain to landowners. This one also comes from Belmont County, OH–perhaps the hottest of the hot places for drilling right now in the Utica Shale. A landowner from Martins Ferry, OH says XTO offered him an eye-popping $8,000 per acre signing bonus with 20% royalties, and Aubrey McClendon’s American Energy Partners offered $6,000 per acre with 20% royalties. Both have a “market enhancement clause” in the lease. The landowner didn’t like the clause, fearing it would reduce his royalties. The landowner was told by either XTO or AEP or both (we’re not sure), that they would force pool him if he didn’t sign. By force pooling him he would not get a signing bonus at all and only a 12.5% royalty. These kinds of strong-arm tactics give the industry a black eye in our opinion…
Read More “Another Belmont County Landowner Threatened with Forced Pooling”